Our financial system is currently being manipulated by a self-serving individual, along with his associates from the industry, while a submissive Congress remains passively compliant.
### The Rise of Blockchain Technology
Artists are facing significant challenges in monetizing their work today. The rise of artificial intelligence is rapidly transforming the landscape, as it absorbs various forms of creative expression—art, music, and writing—without compensating the original creators, creating a sense of urgency among artists. A recent article highlights this shift: “Xania Monet is the first AI-driven artist to appear on a Billboard airplay chart, and she likely won’t be the last.”
Another crucial development is underway: the integration of blockchain technology into our banking and financial systems. The United States’ financial and political elite are positioning themselves to capitalize on this innovation. Major financial institutions like JP Morgan Chase, Bank of America, Citi, and Goldman Sachs, alongside investment giant BlackRock, which manages $13.5 trillion in assets, have already begun embracing blockchain technology. Surprisingly, there has been minimal discussion within the creative community regarding the implications of this shift. With the assumption that more artists than business professionals read The Arts Fuse, I will attempt to clarify what blockchain technology is and its potential impact on artists.
### Understanding Blockchain Technology
The concept of blockchain was first introduced by an individual or group known as Satoshi Nakamoto in a 2008 paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” It consists of a network of computers that can be either centralized or decentralized. Transactions are recorded on a distributed ledger and encrypted for security. The integrity and accuracy of these ledgers are maintained by a group of participants known as miners.
Transactions are bundled into blocks that are then added to a continuous chain, hence the term blockchain. Once information is entered into the blockchain, it is theoretically immutable, removing the necessity for intermediary parties. The touted benefits of this technology include enhanced security, transparency, permanence, scalability, efficiency, and adaptability.
The currency used within a blockchain is referred to as cryptocurrency. Bitcoin was the first cryptocurrency, introduced as open-source software in 2009. As of mid-2023, there are over 25,000 different cryptocurrencies available. These can be categorized into various types: Altcoins (which are not Bitcoin), Stablecoins (pegged to traditional currencies or commodities), and Memecoins (notoriously volatile, their value is influenced by social media trends). Notable cryptocurrencies include Tether, XRP (Ripple), and Ethereum, the latter of which has gained prominence by introducing “Smart Contracts,” a critical feature for scaling blockchain technology.
### The Drawbacks of Blockchain
However, there are significant drawbacks to consider: the substantial energy consumption associated with blockchain operations, the anonymity it offers which can facilitate illicit activities like money laundering, and its susceptibility to cyberattacks. The technical complexity of this system is overwhelming, filled with jargon and acronyms that can be daunting for newcomers. Additionally, the cryptocurrency market is highly volatile, with prices that can change drastically in a short time.
### The Shift in Attitudes Toward Cryptocurrency
Once dismissed and ridiculed by the financial and political sectors, blockchain technology has now been embraced as a potential economic solution. Former President Donald Trump has played a significant role in this transformation, though his motivations appear to be more self-serving than altruistic.
A few years back, Trump openly criticized Bitcoin, labeling it “not money” and “based on thin air” in 2019. He further described Bitcoin as a “scam” and a threat to the U.S. dollar’s dominance in 2021. However, during his 2024 campaign, Trump reversed course by accepting cryptocurrency donations and hosting fundraising events with leaders from the crypto industry. Upon taking office, he issued executive orders aimed at establishing the U.S. as the “crypto capital of the world.” This included a directive to create a U.S. Strategic Bitcoin Reserve using seized assets to build a government-held Bitcoin stockpile.
Trump’s administration relaxed regulations surrounding Bitcoin that had been enforced during the Biden administration’s SEC tenure. He also pardoned several individuals involved in the crypto sector, including Binance founder Changpeng Zhao. Notably, Juston Sun, a Chinese crypto entrepreneur and founder of the TRON blockchain platform, invested $75 million in the Trump family’s World Liberty Financial. Additionally, venture capitalist David Sacks, known for his advocacy of blockchain, was appointed as the White House’s crypto czar.
The Trump family ventured into cryptocurrency projects, launching a meme coin and a stablecoin (USD1) through their company, World Liberty Financial. Trump has also revealed personal investments in Ethereum and other digital assets, yielding over $1 billion in returns thus far—a mere fraction of the larger crypto landscape. This article will not delve into the specifics of how this remarkable operation is being executed, as that has been previously explored in my blog.
### Implications for Artists
What does this intricate web of actions mean for artists? Is there a potential upside to this development?
In theory, blockchain technology could empower artists to connect directly with their audience and sell their work without intermediaries such as galleries, record labels, or agents. Creatives could also offer shares in their work’s profits, exclusive content, or access to events and creative decisions. Furthermore, cryptocurrency could introduce innovative crowdfunding methods that bypass conventional funding avenues.
Non-fungible tokens (NFTs), which are unique digital assets built on blockchain technology, represent digital or physical items—such as music or artwork. Artists can sell NFTs, which helps safeguard their work from unauthorized copying. When NFTs are sold, “smart contracts” can ensure that artists receive a royalty every time their work is resold in the secondary market, a revenue stream that has historically been challenging to manage.
In theory, blockchain systems provide an immutable public ledger that tracks transactions and ownership history, aiding in verifying authenticity and reducing fraud risk. Additionally, cryptocurrency transactions can enable artists in regions lacking banking infrastructure to access a global market and receive instant payments.
### Cautionary Notes
While this all sounds promising, many remain skeptical, recalling the overly optimistic discussions that accompanied the early days of the internet. The rhetoric is reminiscent of earlier claims that artists would gain control over their careers, directly engaging their fans and eliminating intermediaries. While some progress has been made, it has not reached the anticipated scale.
It was assumed that artists would naturally transition into entrepreneurial roles. Although technological barriers existed, artists could hire specialists to handle website creation, SEO, merchandising, financial management, and social media presence—all of which came with costs.
The rise of illegal downloading and low-paying streaming services disrupted this model. Moreover, a small group of gatekeepers learned to dominate online spaces, manipulating algorithms that favored established success over emerging talent.
Success in the blockchain realm will likely present similar challenges, perhaps even more daunting. A single misstep in managing a digital wallet could lead to catastrophic losses for artists.
### Additional Concerns
The volatile nature of cryptocurrency poses financial risks for artists who may depend on it for steady income or price their work based on fluctuating currencies. Furthermore, the legal and regulatory landscape surrounding cryptocurrencies and NFTs is still evolving. Although Trump’s GENIUS Act aims to create a framework for accumulating digital assets, it lacks robust protections against illicit financial activities and does not adequately safeguard consumers. The legislation favors traditional banks while allowing tech giants to engage in banking-like operations without facing stringent regulations.
Few artists possess the financial and legal resources necessary to navigate the shifting tax and legal implications of cryptocurrency.
As noted by financial analysts, the rise of cryptocurrency is likely to exacerbate the existing wealth gap. When mainstream media begins promoting blockchain, those with resources will be positioned to benefit disproportionately, while those without will be left scrambling for minimal gains. Moreover, the environmental impact of increased energy consumption associated with blockchain operations is receiving scant attention amidst the fervor for profit.
In earlier times, individuals could repair radios, TVs, or cars. Currently, even the creators of AI struggle to comprehend how interconnected systems function. The blockchain environment is complex and nearly inaccessible to those without a strong business background. Our financial system is effectively being commandeered by a self-interested individual, aided by his industry allies and a Congress that appears to be submissively compliant.
